#Nicaragua 🇳🇮 #APriori_Article: The Ultimate Beneficial Owner in Nicaragua

The ultimate beneficial owner refers to the individual who exercises effective control over, or who directly or indirectly holds a significant ownership interest in, a legal entity. In Nicaragua, this figure is regulated by Law No. 1035, which amends Law No. 698, the General Public Registries Act, as well as other supplementary regulations, enacted on August 25, 2020. The legislation provides that all business entities registered with the Commercial Registry must identify and register their UBO.

The primary objective of this regulation is to align the country with international standards established by organizations such as the Financial Action Task Force (FATF), thereby promoting greater transparency in corporate structures and fighting illegal activities.

Penalties for Non-Compliance

Failure to comply with any UBO registration-related obligations entails various penalties under the current legal framework, including:

Companies that fail to submit the required information may be penalized with fines that vary depending on the severity of the breach and the length of the registration delay.

The law allows for the temporary suspension of commercial activities for companies that fail to comply with this obligation within the established deadlines.

In cases of repeated non-compliance, business licenses may be revoked, thereby impairing the company’s ability to operate in the country.

If the breach is linked to crimes such as money laundering or terrorist financing, the responsible parties may face criminal penalties, including judicial proceedings and terms of imprisonment.

Legal and Economic Implications

The obligation to register the UBO results in different implications:

• In the legal sphere:

It enhances transparency and encourages compliance with both domestic and international laws. Furthermore, it enables authorities to exercise greater oversight over commercial entities and their owners.

• In the economic sphere:

It may increase operational costs for companies due to the need for internal audits and additional procedures to identify the UBOs; however, this cost is offset by the trust generated by a more transparent system.

• In the social sphere:

It reinforces the perception that government institutions are committed to prevent organized crime and corruption.

Recent Developments and Updates

In July 2023, amendments were introduced to the regulatory framework governing the registration of UBOs, with the following notable changes:

1. Shortened deadlines: Newly incorporated companies now have 15 days from their incorporation date to register their UBO, instead of the previously established 30 days.
2. Mandatory residence requirement: The individual responsible for carrying out the registration must reside in Nicaragua, in order to ensure more effective control over local operations.
3. Audits and verification: Mandatory audits have been implemented to verify the accuracy of the registered information, thereby strengthening the supervisory system.

From a legal perspective, the UBO framework represents a significant progress in the fight against financial crimes and corruption in Nicaragua. However, the success of these measures depends on the commitment of companies to comply with their legal obligations, as well as on the government’s capacity to enforce these regulations. The recent reforms reflect an effort to adapt to international standards and to ensure a more robust and transparent system.

The registration of UBOs not only promotes legal compliance but also strengthens trust in the market and in the country’s institutions.